On July 15, 2016, Jean Farrington, a Division of Insurance hearing officer acting on a show cause proceeding initiated by the Division entered an order revoking the nonresident producer license of Jeffrey Brian Cohen, 40, formerly of Reisterstown, Maryland. The Hearing Officer’s decision also required the return of any and all producer licenses, to cease transacting any insurance business in Massachusetts, and to dispose of any interests in Massachusetts as a proprietor, partner, stockholder, officer, or employee of any licensed insurance producer.
Thirty-seven-year sentence for insurance fraud with $137 million in restitution
One of the grounds for revoking Mr. Cohen’s nonresident producer licenses in Massachusetts was that on Dec 10, 2015, a federal judge in Maryland sentenced Mr. Cohen to 37 years in prison followed by three years of supervised release for wire fraud, aggravated identity theft, making false statements to an insurance regulator and obstruction of justice. The judge also entered an order requiring Mr. Cohen to pay restitution of $137 million.
Plan to obstruct justice by murdering judge and three others
The obstruction of justice arose out federal agents discovering Mr. Cohen’s bizarre plot to prevent information of his insurance frauds from being handed over to law enforcement or to wreak vengeance on those who had already given over information to law enforcement through murder. The targets, for a $25,000 long-range sniper-style rifle he purchased, included the then Lieutenant Governor of Delaware, a Delaware Court of Chancery judge, as well as two lawyers who had reported his fraud to federal authorities.
Five thousand policyholders paid on hundred million in premiums to sham company
Mr. Cohen, an ex-bouncer, ran a liquor liability risk retention group, Indemnity Insurance Corporation RRG (Indemnity). Indemnity, along with a predecessor risk retention group in Washington, D.C. that he controlled specialized in selling general liability, liquor liability, and excess liability to nightclubs, concert tours, and special events in several different states in the Delaware region.
According to court documents, more than 5,000 policyholders paid more than $100 million in premiums for coverage that was illusory because Cohen’s companies never had sufficient capacity to cover its loss exposure. When Indemnity collapsed in 2013, Indemnity’s policyholders were left without insurance. Claimants that had suffered substantial injuries and the estates of claimants who had been killed were left with little recourse because of Indemnity’s risk retention status.
When his insurance fraud bubble burst in 2013, Mr. Cohen was paying himself over $96,000 a month. He lived in a multi-million-dollar house in Florida, and maintained homes at different points in Phoenix, Arizona, and in Reisterstown and Baltimore Maryland. He purchased luxury cars including a Bentley and an Aston Martin with a license plate reading “RISKTKR.”
The sentencing judge made a factual finding that the actual losses caused by Mr. Cohen’s insurance fraud scheme exceeded $100 million.
Hoodwinked A. M. Best into giving Indemnity A- rating
In pleading guilty, Mr. Cohen admitted that from January 2008 to the fall of 2013, he had obtained insurance premiums by falsely representing the financial status of Indemnity by creating false financial documents, including bank statements, letters of credit, and confirmations of bank account balances.
Mr. Cohen also transmitted false emails, management representation letters, financial statements, and other documents to the insurers’ auditing firms, so the auditors would provide an unqualified audit opinion on Indemnity-DC and Indemnity financial statements that Mr. Cohen knew were false. Mr. Cohen used the name and identity of a bank official to create a false bank confirmation.
He used the false documents to get A.M. Best to give financial ratings for Indemnity and Indemnity-DC that were not based on the companies’ true financial condition. Mr. Cohen then touted the A.M. Best ratings to potential policyholders, policyholders, and regulatory agencies to prove the solvency of Indemnity.
Mr. Cohen plots to kill a judge, two lawyers, and Delaware’s lieutenant governor
The Delaware Insurance Commissioner had already begun civil proceedings against Indemnity and its affiliates, when in October 2013, two attorneys referred Cohen’s criminal offenses to federal authorities.
Besides making verbal threats to the lawyers, Mr. Cohen, according to the sentencing judge’s findings, meant to harm a Delaware judge in the insurance litigation over Indemnity, the two attorneys involved, and “a Delaware government official” who was later identified as the state’s lieutenant governor.
From May to June 2014, Cohen searched online terms involving the victims’ home addresses, ammonium nitrate bombs, other bombings and explosions, and how to assemble bombs. In June 2014, he purchased 50 pounds of ammonium nitrate. He also purchased a sophisticated $25,000 rifle with 200 rounds of ammunition from a specialty firearms manufacturer, and $550 worth of fuses and incendiary ammunition. He also bought night vision binoculars for more than $3,500.
Just before his arrest in June, he purchased personal information about the individuals he was targeting, including their personal residences, family members and phone numbers. On June 20, Cohen created, printed, and used directions to travel from Baltimore to the homes of the Lieutenant Governor and the Delaware judge. While at one of the public official’s home, Cohen took notes, including “get real estate listing for scouting,” “not much cover must be night,” and “do it late – after dusk.”
As Mr. Cohen’s bizarre plans became clearer, federal agents arrested him and executed search warrants on his residence and seized the $25,000 rifle, in addition to a backpack containing wigs, masks, a false mustache, gas masks, several knives, wire garrotes, strike spikes and camouflage pants. They also found a military style vest, rifle scopes and accessories, ammunition for guns, bolt cutters and a GPS device.
Revocation for failing to report administrative actions in other states based on federal conviction for insurance fraud
The Division based its March 11, 2016 Order to Show Cause why Mr. Cohen’s nonresident producer license should not be revoked for his failure to report administrate actions against him in four states and a federal criminal conviction.
The Order to Show Cause alleged that in 2013 Maryland revoked Mr. Cohen’s insurance producer license and that Washington, Idaho and Vermont had each revoked his nonresident producer licenses that these states had issued to Mr. Cohen. In addition, the Division alleges that on or about December 14, 2015 Mr. Cohen was convicted in the United States District Court for Maryland of wire fraud, aggravated identity theft, making false statements to an insurance regulator and obstruction of justice.
Licenses in Massachusetts revoked but no fines imposed
In Mr. Cohen’s case, his federal felony convictions and the unreported license revocations based upon these convictions, made the orders entered by Hearing Officer Farrington a foregone conclusion.
Mr. Cohen obviously could not appear, even if he had wanted to, at the hearing to contest any of the charges in the Order to Show Cause. The Hearing Officer reviewed the incontrovertible evidence of the felony convictions and the evidence of the administrative actions against Mr. Cohen’s licenses in Maryland, Idaho, Vermont and Washington and entered her orders against him.
The Hearing Officer ordered:
- That any and all insurance producer licenses issued to Jeffrey B. Cohen by the Division are hereby revoked; and
- that Jeffrey B. Cohen shall return to the Division any licenses in his possession, custody or control; and it is
- that Jeffrey B. Cohen is, from the date of this order, prohibited from directly or indirectly transacting any insurance business in or acquiring, in any capacity whatsoever, any insurance business in the Commonwealth of Massachusetts; and it is further ordered,
- that Jeffrey B. Cohen shall comply with the provisions of Chapter 175, §166B and dispose of any and all interests in Massachusetts as proprietor, partner, stockholder, officer or employee of any licensed insurance producer.
Not surprisingly, the Hearing Officer did not impose any fines against Mr. Cohen as the $137 million restitution order entered against him by the United States District Court made such an order almost ludicrous under the circumstances. Obviously any fines imposed would have been uncollectible.
